The Energy Productivity Supergiant

November 1, 2011

The Canadian economy produces 40% more value for every unit of fuel and electricity it consumes than it did in 1971.The biggest petroleum finds are dwarfs compared to this energy productivity supergiant.

The improvement in Canada’s energy commodity productivity is the single largest contributor to the country’s energy security over the last 40 years. It saves us more fuel and electricity today than the combined total of all the new sources of oil, gas, coal, nuclear, hydro, solar, wind and biomass energy we’ve developed over the last four decades.

And we’re not even close to fully exploiting a vast resource that is limited only by the scope of human ingenuity. A resource that grows whenever anyone has a bright idea for doing something in a way that uses less fuel or electricity.

The rise of energy commodity productivity is not unique to Canada. Other industrialized countries have made similar gains, and increasing energy productivity is a hallmark of the urbanization and demographic transition in less industrialized economies.

The big surprise is that only about one-third of the gain results from more efficient use of fuels and electricity: from fuel-efficient vehicles, better insulated buildings, more efficient lights and appliances. The rest can be traced back to other changes going on in our society, changes that allow us to get the services and amenities we need while inadvertently reducing our demand for energy.

Primary industries like pulp and paper and steel extended their ranges to include higher value-added products, not primarily to save energy but to remain competitive.

A wider shift from primary to secondary manufacturing contributed to an economy that generated more activity with proportionally less energy.

Economic activity in the tertiary industries grew much faster than service businesses’ need for floor space.

Residential consumption hit a plateau, with most households realizing they already had one of every appliance they needed and boomers starting to downsize.

So in the end, if you had to pick one driver for lower energy consumption, compact fluorescent or even LED lighting would take a back seat to the countless, individual business decisions and consumer choices that made our energy economy far more efficient. In a 2002 report on low-emission options for Canada, the David Suzuki Foundation concluded that energy productivity improvements since 1970 had:

Saved Canadian households and businesses $4 billion per year in avoided fuel and electricity bills

Freed up hundreds of billions of dollars in capital investment that would otherwise have been needed for new oil, gas, coal, hydro-electric, and nuclear megaprojects

Contributed to job creation by reducing the capital dollars going into energy–which accounted for 20% of business sector investment in 1998, but created only 2.5% of business employment

Displaced fuel and electricity supplies that would have added 30 to 40% (200 to 300 million tonnes of CO2 per year, as of 2002) to Canada’s greenhouse gas emissions

Reduced smog and other air pollution in Canadian cities by 20-25%, compared to what would have happened without productivity growth.

When we think about Canada’s path to a low-carbon energy future, we too often limit our focus to the emission reductions we can achieve by using fuel and electricity more efficiently or switching to renewable and low-carbon fuels. These options do offer enormous opportunities for a cleaner, more efficient system, but the goal of a sustainable, low-carbon energy future requires wider system boundaries. The fuel and electricity markets are subsystems in a much larger web of value creation, and to map a sustainable energy future, we have to understand how that larger system works.

This is where the energy supergiants of the 21st century reside, where the game-changing business opportunities will be found, and where a sustainable, low-carbon energy future becomes a realistic goal.